Can You Really Retire Early? Work Flexibility Could Help

Can you really retire early at 40 or even 50? Yes, but it takes preparation, planning, and diligence. And perhaps workplace flexibility can help, too! Save

We’ve all read the articles. The one about the couple who retired in their 30s to travel the world. Or the article on the couple who saved $1 million in four years to retire at age 43. Or the feature about how three professionals all did drastically different things to retire at 40.

Those articles are either motivating—or nauseating—depending on an individual or couple’s current financial/retirement status. Can you really retire at 40 or even 50? Yes, but it takes preparation, planning, and diligence. And perhaps workplace flexibility can help, too!
“I think that one of the keys to being able to retire early, regardless of your job or lifestyle, is that you save, spend less, and invest simply,” said Sandy Young, founder of SY Financial Group. “It also helps to always keep track of where your money is going, and reduce your current spending wherever you can.”

The average person can cut costs here or there to have a little extra “free” money, but most of the time, those financial trims will not be enough to set one up for retirement, said Ryan Moore, known as “Ryan The IRA Guy.” “The joys of early retirement and the freedom of choices that financial security brings can put a pleasant smile on one’s face, but how to accomplish it becomes a question,” Moore added.

Want to retire early? Use these tips to help you get there:

1. Workplace flexibility could offer opportunities.

While retiring early is the dream—and goal—of many, it’s just not always possible for a variety of factors that differ for each individual. But connecting with a financial professional to set up a retirement plan that fits each person’s unique needs and goals can help flex workers get on the right path to retirement.

If one is seeking additional income in order to reach the goal of retiring early, finding flexible work is a great way to supplement income.

That’s a win-win for anyone, whether they are just starting their career, midcareer, or seeking additional income to retire, or after retirement.

2. Planning is everything.

According to Pew research, 42 percent of all U.S. workers lack access to an employer-sponsored retirement plan, including most entrepreneurs, gig or independent workers, and employees of small businesses.

That’s why planning is everything, said Vic Patel, founder of Forex Training Group, and a professional trader and investor with more than 20 years’ experience in stock, futures, and foreign exchange markets. “And if you plan properly, there is no reason why you cannot retire at 55 or even 50,” he said. “But that requires a willingness to create a solid financial plan and execute on it.”

Let’s say you’re 20 years old and you want to retire by 50 with a $1 million dollar nest egg by then, Patel said. If one was to put $500 per month into an equity index fund like the S&P 500, which has historically had about an 11 percent return over the past 50 years, by the time one turns 50, they would have over $1.3 million in that account, Patel said.

Patel’s message: Start saving now, and don’t break from the plan. “The sooner you start, the earlier you can retire.”

Easier said than done, right? So, when you begin saving for retirement, turn retirement planning into a monthly bill, Moore said. Set a goal and “pay” yourself at the first of each month (put that payment into a retirement account). Don’t deter from that plan.

“Compound interest is the eighth wonder of the world,” Moore said. “The problem is that we seem to overlook the fundamentals. It takes two things for compound interest. Interest, of course, being number one, but being constant in our goals, that’s the part that we always seem to overlook. Make your interest make more interest. That’s the golden key to financial freedom. In other words, continue to save frequently, increasing your savings when you can.”

Here’s where work flexibility could help once again. The extra income earned from a part-time position can go a long way towards your savings and helping you retire early.

And there are basic, fundamentally sound ways to retire early, like following these tips from Young:

Tips for Retiring Early:

Save 15 percent or more of your income for eight to 10 years, early or late in your career, to ensure that you can save enough to retire earlier rather than later.

Stick to living with less, ideally where there are lower taxes, lower living costs, and cheaper homes. This is where a telecommuting gig can really come in handy since you’re able to work from anywhere.

Consider investing in real estate and, more importantly, be able to do the upkeep yourself instead of hiring someone.

Don’t procrastinate; start today. Have self-discipline and build a solid nest egg. Don’t raid it and never borrow money from it for your current lifestyle, and don’t spend any of it until you retire.

Only have one credit card per family at any given time. This will help avoid debt that could keep you working longer.

Consider opening a Roth IRA, which is a good way to save without excessive taxes.

There are also non-traditional methods of achieving the goal of retiring early, such as investing in real estate, said Matthew Carbray, a certified financial planner/managing partner with Ridgeline Financial Partners LLC/Carbray Staunton Financial Partners LLC.

The acquisition and management of income-producing real estate is one of the more popular methods his clients have used to help them retire early.

“It usually starts with a small investment in a multifamily housing unit and as cash flow improves and becomes positive and can be accumulated that can be parlayed into another property,” Carbray said. “As long as the fundamentals work with the real estate and excessive leverage or borrowing is not abused, one can weather the real estate cycles and build a portfolio that will displace traditional income earned from employment.”

What’s left over?

Don’t focus only on what you save, focus on what you pay out, said Alan Porter, a tax free retirement specialist with the American Tax Planning Institute. You see the advertisements on TV, he says: What is the number you need to get to retire? $1 million? $2 million?

It is not that number that matters; it’s what you have left after paying taxes that matters, he said. He emphasizes tax codes and how to take advantage of them to reduce client’s taxes and increase their income. He educate clients on safety and protection of the family. “Very few advisors do this. They are there to sell them a product,” Porter said. “Hoarding cash is not the answer but having liquidity use and control of your assets is.”

Porter said many people overlook the tax-free investment opportunities provided by insurance companies. These investment products protect an individual and one’s family, are guaranteed by contract to never lose money because of a stock market loss, and you do not have to be 59-1/2 to take your retirement income. His point: There are more options than saving money and investing in a 401(k), for example.

“I tell people that they or their advisors may be the smartest people in the world, but it is what they don’t know that will end up costing you, the client, hundreds of thousands, possibly millions of dollars in undue taxes, fees, and lost opportunity costs,” Porter said.

Recently, the U.S. Treasury launched myRA, a new retirement savings account made available under the direction of President Barack Obama. myRA is different from other retirement savings options because it eliminates complexity, fees (it’s free), lack of portability, and market risk. Most importantly for gig workers, it’s not connected to any kind of employer, nor does it have many of the barriers that prevent these kinds of workers in enrolling in a traditional or Roth IRA.

There are a variety of traditional and non-traditional paths to retiring early. The key is to find one that works for each individuals situation and sticking to it. And if you do, maybe someday that ‘how to retire early’ story will feature you and your secrets to success.